ODI Proposes clarification of “Inducement” law

Below is a draft Bulletin that the Ohio Department of Insurance (ODI) has prepared to clarify the prohibition against rebates and advantages (inducements) under Ohio Revised Code Section 3933.01 and 3911.20.  The Bulletin would authorize expenditures of up to $50 “when an item or meal is given to induce an insured individual or a potential insured individual to obtain a policy quote or general insurance information and is not tied to the purchase of an insurance policy.”  OAHU will let you know when the Bulletin is finalized.

BULLETIN NO. 2009-___

GUIDELINES GOVERNING PROMOTIONAL AND ADVERTISING GIFTS

                                                                                                          (Effective             )

 

The purpose of this bulletin is to provide guidance to insurance agents and insurance companies who wish to give promotional or advertising items to potential insureds in exchange for the opportunity to market insurance products.   Ohio law generally prohibits the giving of something of value as an inducement to purchase insurance.  Specifically, Revised Code section 3911.20 prohibits life insurance companies and their agents from giving any rebate of premium payable on the policy or any valuable consideration or inducement as an inducement to purchase insurance, while Revised Code section 3933.01 prohibits other than life companies and their agents from giving any rebate of premium on the policy or any valuable consideration or inducement not plainly specified in the insurance policy.

The Superintendent has determined that a promotional or advertising item or meal  having a fair market value of fifty dollars or less is not a valuable consideration when the item or meal is given to induce an insured individual or a potential insured individual to obtain a policy quote or general insurance information and is not tied to the purchase of an insurance policy.  Therefore, sections 3911.20 and 3933.01 of the Revised Code do not prohibit such gifts. “Fair market value” means the price for which a single comparable item of like kind and quality could be purchased in a retail transaction.

Agents and companies are reminded that any promotion must comply with all existing Ohio laws.

 

_______________________________

Mary Jo Hudson
Superintendent of Insurance

 

3933.01 Prohibition against rebates and advantages in policies.

No corporation, association, or partnership engaged in this state in the guaranty, bonding, surety, or insurance business, other than life insurance, nor any officer, agent, solicitor, employee, or representative thereof, shall pay, allow, or give, or offer to pay, allow, or give, directly or indirectly, as inducements to insurance, and no person shall knowingly receive as an inducement to insurance, any rebate of premium payable on the policy, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any paid employment or contract for services of any kind, or any special advantage in the date of the policy or date of its issue, or any valuable consideration or inducement not plainly specified in the policy or contract of insurance or agreement of indemnity, or give, receive, sell, or purchase, or offer to give, receive, sell, or purchase, as inducements to insurance or in connection therewith, any stock, bonds, or other obligations of an insurance company or other corporation, association, partnership, or individual.

Sections 3933.01 to 3933.03, inclusive, of the Revised Code do not prevent the payment to an authorized officer, agent, or solicitor of such company, association, or partnership of commissions at customary rates on policies or contracts of insurance effected through him by which he himself is insured, provided such officer, agent, or solicitor holds himself out as such and has been engaged in such business in good faith for a period of six months prior to any such payment. Such sections do not prohibit a mutual fire insurance company from paying dividends to policyholders at any time after such dividends have been earned.
Effective Date: 10-01-1953

3911.20 Prohibition against rebates and special favors - bonuses and industrial insurance excepted.

No life insurance company doing business in this state, whether on the group insurance or any other plan, shall make or permit any distinction or discrimination in favor of individuals between insured persons of the same class and equal expectation of life in the amount of payment of premiums, or in rates charged for policies of insurance, or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of the contracts it makes. No such company, or any agent thereof, shall make any contract of insurance or agreement as to such contract, other than as plainly expressed in the policy issued thereon.

No life insurance company doing business in this state, or any officer, agent, employee, or representative thereof, nor any other person, shall pay, allow, or give, or offer to pay, allow, or give, directly or indirectly, as an inducement to insurance, nor shall any person, partnership or corporation knowingly receive as such inducement to insurance, any rebate of premium payable on the policy or any special favor or advantage in the dividends or other benefits to accrue thereon, or any special advantage in the date of a policy or date of the issue thereof, or any valuable consideration or inducement. Nor shall such company or person give, receive, sell, or purchase, or offer to give, receive, sell, or purchase, as inducements to insurance or in connection therewith, any stocks, bonds, or other obligations or securities of any insurance company or other corporation, association, partnership, or individual, or any dividends or profits to accrue thereon, or any paid employment or contract for service of any kind, or anything of value; nor shall such company or person give or offer to give, or enter into any separate agreement promising to secure, as an inducement or consideration for insurance, the loan of any money, either directly or indirectly, or any contract for services; nor shall such company or person require as a condition of or in connection with the granting of a loan, that the applicant or borrower or any other person, either directly or indirectly, acquire a policy of life or accident and health insurance from any particular company, agent, or person.

No person shall receive or accept from any company, agent, sub-agent, or any other person any such rebate of premium payable on the policy, or any special favor or advantage in the dividend or other benefits to accrue thereon, or any valuable consideration or inducement not specified in the policy of insurance. No person shall be excused from testifying or from producing any books, papers, contracts, agreements, or documents at the trial of any other person charged with violation of this section, upon the ground that such testimony or evidence may tend to incriminate, but no person shall be prosecuted or subjected to any penalty or forfeiture on account of any transaction, matter, or thing concerning which he so testifies or produces evidence, and no testimony so given or produced shall be received against him upon any criminal investigation or proceeding involving rebates or violation of insurance laws.

This section does not prohibit any company issuing nonparticipating life insurance from paying bonuses to policyholders or otherwise abating their premiums out of surplus accumulated from nonparticipating insurance; nor does it prohibit any company which transacts industrial insurance on the weekly payment plan from returning to policyholders, who have made premium payments for a period of at least one year directly to the company at its home or district offices, a percentage of the premium which the company would have paid for the weekly collection of such payments.

In so far as it is adaptable to the conduct of such business, this section is also applicable to the sale and purchase of annuities by and from life insurance companies.
Effective Date: 08-11-1959

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